Over the years I have commented in both written and video form on the 4-year cycle of Bitcoin. This cycle has, thus far, remained intact. However, there is now a strong argument to be made that Bitcoin may not follow this cycle and reach a cycle top sooner than most people anticipate.

To understand this thesis, we must go back to the beginning as it were and properly understand the 4-year cycle of Bitcoin. The 4-year cycle of Bitcoin is NOT the halving cycle it is distinct from this cycle entirely. Whilst the halving cycle is on average every 4 years the data is clear in that sometimes this cycle varies slightly to its completion. This of course is because it is based on blocks mined on the network and not time. Therefore, when we examine the data, we notice that Bitcoin’s halving cycles occasionally approach the 4-year mark, but in certain instances, they last for approximately 3.5 years. This variation adds an element of unpredictability to the Bitcoin halving cycle.

However, the 4-year cycle is calculated from one peak to the next and most importantly from one market bottom to the subsequent bottom. To date Bitcoin has always taken 4 years to reach its peak measured from its previous high and 4 years to reach its bottom when measured from its previous bottom.

Essentially, the 4-year cycle has historically offered a more precise measure of Bitcoin’s market behaviour, enabling traders to historically identify both market tops and bottoms. Understanding this cycle has provided traders with a valuable edge, as it has historically facilitated optimal entry points for both long and short positions. The chart below illustrates how the 4-year cycle has worked to date. From each cycle low to the next is 4 years. This is important because it signifies the death of one cycle and the birth of a new cycle.

Why is this time potentially different?

So why is this time potentially different? Traditionally Bitcoin’s accelerated growth has been observed to happen both after the halving event and at the midpoint of each 4-year cycle. Simply put, Bitcoin has never surpassed its previous ATH (all-time-high) prior to the halving and prior to the midpoint. In fact Bitcoin has historically always surpassed its ATH exactly at the midpoint and many months after the halving event (see chart below).

Given that Bitcoin has breached its previous ATH both prior to the halving and the midpoint of the cycle, it is arguable to suggest that Bitcoin’s accelerated growth phase has started much sooner than many anticipated.

This could well be to do with the launching of the spot Bitcoin ETF in January 2024. Either way Bitcoin is performing better at this point of the cycle, which is unusual when considering the historical data. Therefore, if we give this thesis some thought we must consider the possibility of an accelerated growth phase thus seeing a Bitcoin top sooner than anticipated. I say sooner than anticipated because if Bitcoin were to continue to follow the 4-year cycle its anticipated top would be in Q4 2025 as the last peak was in Q4 2021 (4 years in total). When considering the growth phase of Bitcoin something quite interesting can be taken from the data. The real growth phase or ‘mania phase’ historically begins when Bitcoin surpasses its previous ATH and lasts approximately 300 days (see chart).

Therefore, if the ‘mania phase’ or accelerated growth phase is to last a similar amount of time then Bitcoin might see its final top in late Q4 2024 or early Q1 2025 thus reaching a cycle top much sooner than most think.

It is unclear yet whether Bitcoin has entered the ‘mania phase’ because at the point of writing Bitcoin continues to consolidate under its previous ATH. However, it is my view that the next 4/8 weeks will give the trader/investor a very good idea of the path Bitcoin is about to follow. Lastly, there is the possibility that Bitcoin might have a two-top cycle. That would involve two parabolic advances with a very deep and scary drawdown in between. Very similar to the cycle of 2013. However, I will leave that idea to another article in the future.

Crypto Caesar
22.04.2024 AD